NEW YORK – Major U.S. stock indexes dropped more than 1 percent on Thursday after President Donald Trump said the United States would impose import tariffs on steel and aluminum, raising concern about higher prices and a trade war.
The S&P 500 registered a third straight day of more than 1 percent declines. The Dow Jones Industrial Average fell 420.22 points, or 1.68 percent, to 24,608.98, the S&P 500 lost 36.22 points, or 1.33 percent, to 2,677.61 and the Nasdaq Composite dropped 92.45 points, or 1.27 percent, to 7,180.56.
Trump said the United States would impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum next week.
Shares of U.S. steelmakers jumped but industrial heavyweights like Boeing and Caterpillar fell as investors worried about higher raw material costs and trade barriers elsewhere.
The declines put the S&P 500 back into negative territory for the year. The Cboe Volatility Index jumped to a more than two-week high.
"It's been tenuous for the last month, so anything that even looks or smells like it's not good is going to bring the market down quickly. But this is more than that. It's going to raise prices no matter what," said Peter Costa, president at Empire Executions Inc in New York.
Rising inflation and bond yields were the main concerns as Wall Street ended a turbulent February on Wednesday, with the S&P 500 posting its first monthly loss in 11 months.
Stocks had mostly traded lower before Trump's announcement.
Federal Reserve Chairman Jerome Powell tried to temper remarks he made on Tuesday that raised concerns about the potential for four interest rate hikes this year rather than the Fed's forecast of three, but New York Fed President William Dudley was a bit more pointed and said four rate hikes would be "gradual".
But it was the tariff issue that was spinning the market lower as the afternoon wore on.
"The risk to imparting these tariffs is that it invites a retaliatory response from our trading partners and particularly China," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
(Additional reporting by Sruthi Shankar and Parikshit Mishra)